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2/16/19

...in
reverse order, but before that let's note this is the first edition of our regular weekend round-up post for a few weeks. That's because posting on the blog has been light recently and that in turn is because I've been in lazy mode, not been posting as much, had other matters on my mind, doing other things with my time, less urge to fill this humble corner of cyberspace. Pick your fave, I don't care. Anyway, as the urge to rant came back last week you get a Top Three today, so...in reverse order....

2/15/19

...about Ecuador and his take on the political risk aspect of INV Metals (INV.to), even though he claims to be an expert on the place having studied it for years. This is the bit of his reco note yesterday that mentions the issues faced by INV in Ecuador:

There’s one potential issue that I want to
address. Last week, a third-party group in Ecuador filed a legal motion
to place an anti-mining proposition into the upcoming March elections.
In essence,
the idea is to allow localities to pass ordinances that restrict
mining, as opposed to mining being controlled by the national mining
laws.

As I understand it, the government of
Ecuador is opposed to “local” meddling into national mining policy. The
matter just went before an Ecuadorean court, which kicked the issue
upward to the
“constitutional” court.

The government of Ecuador and Ministry of
Mines are strongly on the side of resource exploitation. In a recent
press release, INV detailed the estimated “take” to various levels of
government
in Ecuador, based on the recently released FS:

Corporate income tax (25%) — $177 million

State profit sharing tax (12%) — $107 million

Employment taxes (35%) — $52 million

VAT (12%) and import duties (0–5%) — $110 million

Royalties (5%) — $108 million.

See here for more details.

According to management, there’s a
high-level government delegation visiting the INV project this week.
Apparently, the government wants to show support for mining, investment,
jobs, development
and taxes.

It’s difficult to predict how “legal” cases
will play out in Ecuador… or anywhere, actually. Overall, a favorable
outcome here — one that upholds national control over mining — would be
good for
Ecuador in general and INV in particular. An adverse decision that
permits local meddling would be problematic but not a showstopper at
this stage.

My fave phrase in all that is "As I understand it". After all, I can decide the earth is flat or the moon is made of cheese and then pontificate behind any paragraph starting that way.

Meanwhile, we human being who live in the real world know that just about everything that dumbass has written on the subject is total hogwash. It's honestly difficult to know where to start, there are so many things Byron simply does not understand. Let's start with the political system in Ecuador and no matter what the national executive might say do or want, they cannot simply walk in and overrule the local. Byron King's ignorance is writ large above, he simply does not understand what he is talking about. Or how the "third party group" petition isn't something cooked up just last week, but is the culmination of a process that's been going on for four years. Or how the vote is not under appeal or doubt, but has been officially sanctioned and happens on March 24th. And how the anti-mine contingent is going to win it. And how that vote will stop Loma Larga from ever happening.

If this blithering idiot wants to waste his own money, well fine. But his ridiculously poor DD is going to flush the money of hundreds of naive followers down the toilet, too.

When it comes to The Honesty & Integrity Challenge, Marrone never makes the podium. I mean, how does the 2019 AUY capex estimate of $442m stack up against the consensus forecast of $290m? What's that $30m tax payment?

An interesting detail in the Yamana (YRI.to) (AUY) guidance NR. A part of the guidance on its new Cerro Moro in South Argentina, your humble scribe adds the bold type:

Furthermore, for Cerro Moro, unit costs for 2018 and 2019 have been adjusted to reflect the effects of the export tax in Argentina and the historical Bocamina tax.The inclusion of the export tax, which is in effect through 2020, and the Bocamina tax add approximately $130 per GEO and $40 per GEO, respectively, to the guided costs for 2019.

Sooo, the business-friendly" government lauded as the best thing since sliced bread that did away with the export tax on mining products to great fanfare...then re-introduced them when the self-made financial crisis hit last year and now, as a result, miners pay even more than they did before! Seriously, $170/oz just to get your doré out of the mine and to the ship waiting at the dock must hurt.

On the other hand, Sandstorm (SAND) will be happy with the AUY guidance numbers on this mine, the 6m oz forecast in 2019 is right on the button of its maximum stream delivery. But t that's another story.

2/14/19

Oh my stars! That dumbass Byron King (with Jim Rickards) has just reco'd INV Metals (INV.to) to his flock of sheep.

Holy Sweet Baby Jesus and the Three Wise Men, these amateurs are going to get their asses handed to them on silver platters come March 24th. This, ladies and gentlemen, is the single most stupid, ignorant and lazy mining company stock call of 2019. Retire, you faker.

And don't even get me started on Special K and its plug awful 4q18 numbers, announced last night. Q4 all-in costs of 1287/oz means in simple terms that they're running to stand still and then guidance for 2019 added in $210m in extra capex....cute surprise, no?

But this post isn't about the mediocrity at Kindross, rather another part of this whore-show, the sell side anal ysts covering these companies. To be perfectly honest, I didn't pay attention to the notes published on K this morning by Canada's finest, however A. Reader (smart chap and pal who will remain nameless) certainly did. Here's the mail he kindly sent in to IKN Nerve Centre (slightly edited to protect both innocent and guilty):

Capex: up to $1.05 B, higher than modeled $795mm, with the difference due to higher growth capital.

Impact: Neutral

WHAT?! $200mm!!! Explain this?! That means zero FCF @ $1300. I should note that Scotia and BMO DID NOT EVEN ADDRESS THE CAPEX. Using Ottotrans or The Law of Mining Translation theory, IMPACT NEUTRAL from the sheep = YUCK and FARK. Of course they will clarify this honestly and transparently after the call, right.

On receiving the mail, I checked and yes indeed, all of Canada's suited monkey notes mentioned were of this ilk. So yes, my friend's point is an excellent one, how in the name of all that's sane and healthy can a whole industry take figures published by Kindross, see that the sudden and unexpected 2019 capex lift of over $200m wipes all all free cash flow expectations for the year, consider that KGC will now make the sum total of precisely fuck all in profits in 2019...and either consider the event either neutral to its share price targets or, in the case of two of them, not even bother to mention it? It's crazy.

We the long-suffering people on the sharp end of the shitshow, i.e. retail shareholders, are fed up with the fed up to the back teeth with the way these companies are run as insider-friendly jokes by management teams who think they are God's second gift to the planet but in reality wouldn't last in the C-suite of a normal, well-run capitalist sector sector for more than two minutes. However, the morons running companies like Kindross are being enabled by a kiss-ass complicit world of pathetic and conspiratorial brokerages who either don't have the guts to tell the truth to their clients or they are so deeply in bed with the companies they're supposed to cover that KY Jelly is the only way left to separate them. The above on K this morning (which checks out fully, I hasten to repeat) is a prime example. And these brokerages wonder why they're going out of business.

Further to yesterday's post on Cardinal Resources (CDV.to) that pointed out how the company was paying A$935k per quarter in interest expenses on a U$25m loan priced at LIBOR +7.75% (plus the $2m or so in 'transaction fees' at the front end), your humble scribe's eyes were pointed by a couple of readers toward the latestCDV corporate presentation and, in particular, the slides noting the economic modelling they use to try and sell your their company. Example this one, slide 9:

At what point does it stop being simple corporate BS of the highest order to pretend a cost of capital of 5%, when the real cost for this company to raise money on a gold mine project in West Africa is multiples higher? At what point can you accuse these people of full-blooded fraudulent activity? I'd say we're pretty close here, as the real cost of capital at CDV is obviously North of 15%. I mean, even the company's own literature and economic modelling states at a 10% discount rate the NPV at U$1,250/oz gold (their benchmark number) drops by U$210m (to U$376m). What would a 17% rate do for those numbers above? But no, even after a 2018 PFS on the project using a range of economic criteria and after all the evidence you could ever need that assuming 5% is codswallop, CDV just ploughs ahead in its 2019 corporate presentation and makes believe to a naive world that its project is worth far more than the truth.

By simple logic and by following the trail of clearly marked numbers at CDV, we can state that CDV pays and will pay way more than that imaginary 5% discount rate for its capital. Best guess me at 15% and frankly, that's being generous. However, the CDV management and board have decided not to advertise the numbers that the real rate they pay would do to their project and, by consequence, share price. They are hiding the truth from you, which is just another way of writing the bottom line to this post; They are liars. Burn them with fire. Rant over.

Blackwater is now carried by NGD at $340.3m (it was $552.1m). Even that seems expensive to me and I doubt they'd find a buyer willing to pay that amount of cash for the dog, but selling Blackwater and paying down a lump of that would be corporate alternative now (and stranger things have happened). Either that or kill the goose that lays golden eggs and sell New Afton (a deposit so good that even the numbskulls that ran this company couldn't fark it up). If not, that debt is going to continue to eat NGD the way it's been eaten over the last couple of years, bright and shining new CEO or not.

ND's 4q18 is out, the NR is here and there's plenty to chew on. I have two observations, the first being that we should all admire Renaud Adams greatly for doing this:

Net loss from continuing operations was $727.7 million
($1.26 per share) for the quarter, which includes a $671.1 million ($1.16 per share) impairment loss related
to the Rainy River Mine ($452.9 million) and the Blackwater project ($218.2 million). Net loss from
continuing operations for the year was $1,070.8 million ($1.85 per share), which includes a $953.2 million
($1.65 per share) after tax impairment loss related to the Rainy River Mine ($735.0 million) and the Blackwater project ($218.2 million).

Seriously. That's what a good dozen gold stocks need to do, he has the chops to be honest with the market and it gives a tangible idea of just how much money was flushed down the toilet by the blithering idiots who ran this company before (write the words 'Randall Oliphant' right at the top of that list). As for 2019 at NGD, this sticks out like a sore thumb:

Not good. At all.

2/13/19

Cardinal Resources (CDV.to) filed its quarter to December this morning and it makes for interesting reading, what with the U$25m loan it took out with Sprott Private Resources Lending now showing its effects. Here's what LIBOR+7.75% does to your P+L (note: CDV file in Australian Dollars):

And here's how its booked to the balance sheet.

If you've ever wondered why they call Rick Rule's shop mining's lender of last resort, you might want to consider this example. As for CDV, they took the money in order to get to feasibility stage, not into production or anything. Now with 380m shares out and a market cap of around U$120m, wish them luck because they're going to need it.

The silver lining to the ever-increasing cycle speed of these stupid minor metal fads is that Vancouver can't even get the bullshit juniors out into the public sphere quickly enough before the pump falls flat. "Valley of Vanadium"? Dear Lord of All Mining Gods, save us from this pablum.

VANCOUVER, Feb. 13, 2019 /CNW/ - Regency Gold Corp ("Regency" or the "Company") (NEX: RAU.H) is pleased to announce that it has entered into a definitive agreement (the "DA") dated February 8, 2019, with Vanadium North Resources Inc. ("Vanadium North"), pursuant to which the Company has agreed to acquire all of the issued and outstanding common shares of Vanadium North (the "Acquisition").

Vanadium North is a privately-owned Canadian mining company, which holds the Valley of Vanadium project (the "Valley of Vanadium") in the Northwest Territories.
The 9,600 hectare project is comprised of wholly-owned claims in
addition to an option to acquire 100% of mining claims owned by
Strategic Metals Ltd. ("Strategic Metals"), previously known as the Van project. Strategic Metals and Vanadium North are arm's length parties from each other. continues here

Mind you, they'll still find enough dumbasses to rope together and become hardcore cheerleaders. CEOca built a whole platform on the premise.

2/12/19

I still can't get over that corporate title. Anyway, it's been nearly a year since Peat Resources changed its name to Cobalt Blockchain Inc (COBC.v) (a NR which was of course featured on IKN), so let's see how that paragon of capitalism has been getting on:

Hmmm, that well, eh? Though to be fair, it's not just dumbass retail everything-chasers who have had their hind quarters served to them on a platter thanks to the Co P&D; take Randy Smallwood for example, who got stung by Vale to the tune of $390m because he got all hot and sweaty about cobalt. High flying executives and thought leaders, eh...

Which means of course that IKN will make sure you get to read about it. This from last Sunday's edition of The IKN Weekly, IKN507:

Argonaut
Gold (AR.to) puts in a permit application for its San Antonio project

Normally a mining company would
consider it a proud moment and make plenty of noise about its reaching a
significant milestone in the permitting process of any given project, so at
first sight the attitude of Argonaut Gold (AR.to) not advertising or making a
big fuss its application to the Mexican authorities for the key “change of use
of terrain” (cambio de uso de suelo) permit at its San Antonio mine in Baja
California Sur last week (17) looks a little odd.

However, once the history of the
project, also known as “La Pitalla” from the name of AR.to’s wholly owned local
subsidiary, is recalled it makes more sense. This is the same project AR
obtained in its 2009 buyout of Pediment Gold when it paid far too much for a
controversial project. Local opposition to the project has always been strong
and when in 2012 AR tried to push for permitting (via the same Change of Use
permit) it came up against an environmental lobby which pushed back so hard
that the company, rather than face the inevitable denial, decided to withdraw
its application. There are several aspects of San Antonio that have come under
fire over the years, not least the fact that it is located at a important
juncture in the underground water table and due to that, so say its detractors,
would threaten water supply to the nearby agricultural land and towns if going
ahead (and for what it’s worth, although the NGOs and anti-mining lobbies can
push their objections to extremes on occasions, at this project they do have a
good point and one backed up by several academic level studies as well as
Mexico’s environmental authority Semarnat.

On news of the application by
AR.to, local opposition to the project hit the media channels and made it known
to one and all that the application this time was scarcely different to the one
back in 2012, that their opposition hadn’t changed an inch, that the corrupt
governments that gave the original concessions were no more, that AMLO and his
people would never let this become a mine, that they would fight to their last
breath to stop the mine, etc etc (18), (and plenty more examples of news
reports where they came from). AR.to may want to keep you people up North from
hearing about this process, but it’s going to have a tough time keeping the lid
on locally. Also, as San Antonio
is carried by AR.to at U$114m (U$0.64/share, approx CAD$0.80, it is hardly
insignificant for a company with a share price of CAD$1.82 this weekend. Its
overall price/book ratio (which also includes such mediocrity as the Magino
project) runs at just over 0.5X, so if we go with that as our guide San Antonio would account
for 40c of that $1.82 share price. Frankly, not odds I would play.

2/11/19

MONTREAL, Nov. 17, 2016
/CNW Telbec/ - SNC-Lavalin (TSX: SNC) is pleased to announce that it
has been awarded an engineering, procurement and construction contract
by Corporación Nacional del Cobre de Chile
(Codelco), one of the largest copper producers in the world, for the
replacement of its effluent treatment plant at the Chuquicamata Copper
Smelter, located in the Antofagasta region of northern Chile. Continues here.

UPDATE: Oh, and this (didn't realize the full thing was in two bits, TY reader T for the correction):

SNC-Lavalin (TSX: SNC) is pleased to announce that it has been awarded
an engineering, procurement and construction (EPC) contract by
Corporación Nacional del Cobre de Chile (Codelco), one of the largest
copper producers in the world, for the construction of two sulphuric
acid plants at the Chuquicamata Copper Smelter Complex, located in the
Antofagasta region of northern Chile.

As well as it being mentioned on the latest ConfCall (SNC did not confirm), according to IKN sources it's "an open secret in Santiago". And as it's an EPC contract it means SNC-Lavalin is on the hook for any costs blowouts, not Codelco. That's surely the crux of the fun here. We also note that a quick check of the jobs market in South American engineering shows a whole bunch of openings have suddenly appeared at SNC-Lavalin's Lima Peru office. Probably just coincidence.

In other words, tomorrow (as these words are written). At 2:15pm EST February 12th, there's a Town Hall type presentation on copper and related subjects, with the following as main event:

"...there will be a full presentation by John Black, CEO of Regulus Resources Inc (OTC: RGLSF, TSX-V: REG.) He will tell us about the his AntaKori project in Northern Peru. John Black was the founding president and key driver in negotiating the sale of Antares Minerals to First Quantum Minerals for C$650 million. The team is at it again with Regulus.

Along with a live presentation by management, there will be an expert
Q&A panel of Wall Street veterans asking the tough questions you may
not have thought to ask. There will also be an opportunity to send in
your questions."

This Sunday morning, Peru's environmental authority OEFA is reporting a tailings spillage at the Cuajone copper mine, owned by Southern Copper (SCCO) in the Moquegua region of Peru. It's likely connected to the very heavy rainfall that the region has experienced over the last few days, that's been above and beyond even the normal levels during the normal rainy season. The spill seems to have originated at one of the run-off tunnels (no dams collapsing here, it would seem), but it has been classified as an "environmental emergency". More details as and when.

UPDATE: OEFA also now reports "a green solution" emanating from one of the Cuajone waste dumps since Friday, with the likely cause connected with the extreme weather conditions suffered in the region recently

Here's how the person who alerted me to the blog "World Mine Tailings Failures" explained the site and the work done on the recent Feijao/Brumadinho tailings dam disaster, which has almost certainly claimed more than 300 lives and left an environmental mess of titanic proportions:

"The website in general is a fantastic source of information on TSF
failures. Lindsay Knowles Bowker is the nucleus of a world of experts on
the topic. She has been the central source of info for articles in WSJ,
NYT, Economist, etc"

Go here for the page, where the free PDF download on Feijao/Brumadinho is available. It includes a translation and analysis of the important safety report emitted before the collapse. Fair to say that this report is as definitive as they come, the compilers are also the people consulted by major media channels for their reports.

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